How to Analyze an Income Statement Like a Hedge Fund Analyst

This video covers how to analyze an income statement. How to analyze financial statements is one of the most crucial elements of fundamental investing. In particular, an income statement consists of a company's revenues (sales), its expenses and ultimately the company's profits. This video is an introduction to financial statement analysis for beginners.
After watching this video you will have a better understanding of the following questions:
How to value a stock, How to analyze a stock, how to analyze financial statements, how to analyze financial statements of a company, how to analyze an income statement and balance sheet.
Go to pblc.co/center and you will receive a free stock worth from $3 to $300 once you open and account and make a deposit.
Link to Investor Center Patreon where I post all the tools and resources I personally used to grow my portfolio to $300,000 at 24 years old:
www.patreon.com/user?u=38414104

[@InvestorCenter]

If you are interested in downloading the spreadsheets I used to analyze stocks, you can download them here: www.patreon.com/user?u=38414104

[@InvestorCenter]

@ehvio the second and third tier

[@user-ph1ui9jg6d]

Hiya - this was very insightful. Do I need to sign up to Investor Center to access your spreadsheets. Furthermore, can you please make a video about how to determine growth percentage when forecasting metrics such as revenue or costs?

[@InvestorCenter]

@@user-ph1ui9jg6d yes. I’m going to post all of my spreadsheets that accompany my videos to the patreon. In terms of the growth rates, I’m working on a video for that!

[@user-ph1ui9jg6d]

@@InvestorCenter Thanks so much for your response. is there any other way of staying in touch for example: linkedin or instagram or is youtube the best way?

[@thor4379]

Thank you for the video. Can you do a video about balance sheet analysis as well?

[@joealtamuro]

You mentioned early in the video that you didn’t know why companies would close their books in September instead of December. It’s usually due to “seasonality”, when sales are at their lowest in the year coming off of the summer months. Therefore Net Working Capital [NWC (= Inventories + Receivables - Payables +/- Net Accruals)] should be at its lowest in September. Don’t forget Apple usually releases new products in the 4th quarter so inventory levels should be at their lowest at the end of September. By Closing the books when NWC is at its lowest, Capital employed will also be at its lowest. This will maximize ROCE. Also, it’s just best to close in the quarter with the slowest activity so as not to distract the company from the busy holiday season. Most retailers also operate in this fashion.

[@InvestorCenter]

Wow! That is very interesting. And it makes sense that most of the companies I see with a September year end are retailers

[@indranilsinha4899]

wow ..great insight ! thanks a ton ! How about Microsoft it closes in Jun ??

[@joealtamuro]

@@InvestorCenter Thank you and I just want to say that your videos are excellent!

[@BradDietz]

Most retailers (not Apple) end their FY at end of January. Very few end in December because there is too much Y/Y noise due to calendar shifts. This is also where you squeeze in a 53rd week every 6-7 years.

[@gauravthadanii]

can you explain in a little more detail, how the capital employed would be at the lowest at sept?

[@samman5395]

Your videos like this are so much better than anything else on KZbin. Please make videos about how to analyze the cash flow statement and balance sheet please!

[@InvestorCenter]

Thank you, I really appreciate the kind words!

[@peteryusufov7589]

Yes, please do make the videos you mentioned in the end of this one!

[@FFR2099]

Great, great presentation, I really enjoyed the way you showed how to make a discounted cash flow model in a simple and objective way. I'm studying valuation, but it's really hard to find practical content online, it would be awesome to see a whole series on how to make a proper valuation of a stock and how to read all the three key financial statements (Balance sheets, Cash flow and Income Statement) and how to use the financial ratios (PE, Price to book... ) with a detailed breakdown of each one.

[@jamieamato560]

I'm only halfway through the video and I just have to say your explanations are by far the best I have heard so far. I've been researching how to analyse companies for investment for months, it's been slow progress. Although I was familiar with most of the terms you were speaking about, my understanding of them just trippled thanks to your breakdown of each of them. Thankyou so much I will now prioritize this chanel first, amazing video 😄

[@gt3rsm3plz83]

Thank you for making this. You have a great narrating voice. Very easy to understand.

[@jrums]

Awesome explanation, clear and straightforward. Thank you!

[@lorenvillaverde2564]

I commend the video for comprehensively presenting the idea that Accounting students learn in Financial Analysis!

[@profit_paradox]

Would love to see a video that covers the projections for DCF valuation which is ultimately used to determine if a stock is undervalued!! Very helpful

[@MI-kn3id]

Love the idea behind this video and how you kept it simple. Can you go over projections in a separate video we’re you give a few examples /repetitive so it will the process”sinks in” and we can better apply it to different companies/modules. Thank you.

[@amossenkao385]

Thanks for the great explanation. Can't wait for the ones of balance sheet and cash flow!

[@ftnavy123]

This is one of the best videos I've ever watched on income statements and really filled a lot of gaps I had in my knowledge of why I should care about different items. I would LOVE to see you do a DCF video.

[@InvestorCenter]

Thank you, Josh!!!

[@althe]

Gotta say, your videos and explanations and graphics and topic choices are way superior to everything else (in this genre) on KZbin.

[@jclopez99]

Excellent series of videos. And, yes! Please do a DCF Valuation video. This would be very insightful.

[@BSI_Inc.]

Thanks so much for this video. I hope you also teach us how to analyse balance sheets and cash flow statements and the financial model too coz I personally am still unclear about that

[@InvestorCenter]

I’m working on those videos now! Thanks for the comment, Allen

[@BSI_Inc.]

@@InvestorCenter looking forward to it!😁✌🏾

[@luxurylife7464]

Your videos are wonderfully put together. I would greatly appreciate if you do a DCF model video in the future. You explain things with great ease and would be helpful to understand your view point on discounting cash flows. Thank you and keep up the great work!

[@aroaris843]

Great and simple. While others try to make difficult to understand content yours was very fluid and amazing !

[@InvestorCenter]

Thank you! I really appreciate that

[@rosalieroku3818]

Excellent presentation. I understand this better now. Yes, more on your spreadsheet please.

[@onceuq]

Excellent content! Thank you for your wisdom, and soothing voice.

[@danbuild977]

Just what I needed. Thank you so much for this video.

[@jwia007]

Please teach us more. This is awesome

[@matthines4507]

Great video, I am very interested in how you set up the income statement for predicting the future performance of the company. I would love a video on how you set that up and as you mentioned deriving the cash flows from that. Thanks

[@Honch79]

So well explained, thank you - keep making the videos 🙏

[@straightshootskeet]

Great video, simple and understandable thanks!!

[@meshari.alswainie]

Many thanks to your professional analysis- Meshari from Saudi Arabia

[@sev7n102]

Fantastic video! I love how clearly and thoroughly you present information. You may want to look into teaching, consulting, or creating a course.

[@InvestorCenter]

I’m thinking about creating a course!

[@erickgomez8758]

Would love to see the DCF valuation video!!!! You break things down perfectly and thank you for taking the time and effort of creating these presentations.

[@mariecamero]

I'm a beginner and slowly trying to learn how to analyze financial statements. You mentioned the basic financial model you created and yes please cover it in another video. If there is already, I apologize and I will watch it after this video.

[@monnombre6547]

thank you! you do a very great job simplifying the terminology & explaining...what about a "how to analyze" cash flow statement & balance sheet ?

[@InvestorCenter]

I’m working on those videos now!

[@Toys4Life]

I needed this - thank you!

[@DreaminBig]

That was a really good tip. I’ve heard of comparing statements of a company to another that is in the same business. I didn’t know how. You said to compare YoY% and it’s such an obvious thing that I don’t mid my think of lol. Thank you

[@user-wb5pv8ei1g]

Thank you very much for your job! It`s super useful and very very interesting, can`t wair for your nex video about financial models!😀

[@InvestorCenter]

Thank you for watching! Stay tuned for that video :)

[@georgewyatt2924]

Very good job of explaining these items. Thank you.

[@chrischoi4484]

Really clear and well made video. I look forward to your future content!

[@InvestorCenter]

Thank you, Chris! I look forward to your future comments on future content!

[@aishwaryakochar3334]

Totally amazing. You kept the information and time both concise and useful. Could you also upload the DCF video which you mentioned?

[@michaelflynn1617]

Please do make a DCF video. All of your explanations have been so very helpful and DCF video would really put it all together ❤

[@eFFecTM]

Great video! I came across your channel today and started watching many of your videos while taking notes. I love how detailed you explain things still while trying to keep the overall video compact. I would be very interested to see a video from you on discounted cash flow valuation. Also, happy new year!

[@eFFecTM]

Oh wait, you have made a video on this topic before in September.

[@InvestorCenter]

Happy new year! I will do a more detailed video on discounted cash flow valuation!

[@malikdey-nativemoor2923]

Discounted Cash Flow Evaluation would be so helpful if we were explained in detail. What an amazing channel. Just found this channel looking for how buffet calculates intrinsic value and what a library of information, I stumbled across. Thank You! Investor Center, for delivering amazing Content and great VALUE!

[@isidorocn7982]

This video has been super useful, thanks! And it would be great if you could do another video on estimating future earnings from the income statement. Thanks!

[@ADITYASHARMA-xp3sv]

i came looking at bill ackman's photo(possible click bait) but boy oh boy the content - spot on. Great job

[@yazmut]

so well explained, thank you for the edu

[@aggariba]

love the way you explain, thanks

[@nattsirojussamarn980]

Great explanation Would love to see additional video on DCF valuation. Cheers

[@meheh002]

I'm bumping this up!

[@JedWunderli]

Love your channel. I'd love to see the video that you talked about doing at the end of this one. I think that would be very useful. Thanks for your time and effort.

[@izaactorres5741]

Definitely want to see you breaking down discounted cash flow

[@PeakperformerEmil]

I have a comment for 6:00 - 7:00: The margins of the products and services are actually really important and I personally have never payed attention to them. From now on I will. They are so important because you can see what position you want the company to be scaling. Therefore it would have been nice if you did show how to calculate it. For those who dind't understand, it goes like this: (Service revenue - Cost of service)/Service revenue = Service gross margine. And further down the line, comapnies can't scale their Gross Margines for ever, that's why you actually can't expect them to be scaling and scaling and scaling, because it's unlikely going to happen. But they defenitely should keep at least a stable Gross margine which is somewhat high. At least that's my point of view. Great video, I love it. Lovely greetings from germany

[@anandpatel2624]

This is a great explanation and one very important. Thank you so much. Could you please do one for the DCF?

[@WDWysong]

Wow...outstanding, clear explanation...very helpful. Thank you.

[@InvestorCenter]

I’m glad it was helpful!

[@Dean-tf5nv]

I'm currently doing my CA(SA) articles at Deloitte and just finished writing my CFA level 2 exam and I'm honestly so impressed with this video. I did a 4 year degree specializing in finance with accounting and can confirm that this video explains everything in the SOCI (Newish name for Income Statement as per IFRS) so clearly and concisely. You definitely got a new subscriber!

[@domceja62]

Great video! Very clear and concise!

[@InvestorCenter]

Thank you, Dom!

[@emmanuelgoutonde8216]

Very useful video, Thanks for your hard work!

[@eRaZerrOfficial]

Would be awesome if you could do a "How to analyze a 10k". Great work, really

[@InvestorCenter]

Thank you! I may make that video!

[@lonniehardy3985]

The different fiscal year end dates are caused by the company's adoption of four periods per year consisting of 13 weeks each. Notice each of the four periods end on a saturday. This method causes each of your quarterly reports to contain the same number of weeks (13) and each of your fiscal years to contain exactly 52 weeks. It makes accounting a little more complex but yields exact comparability. Sometimes an accountants nightmare, but worth it in the long run.

[@InvestorCenter]

Interesting! Thank you, Lonnie

[@joelchauho-gmail7630]

Thank you for this video. It helps me a lot of this report

[@InvestorCenter]

Glad it was helpful!

[@davidwestenburg9165]

Geat stuff so far!

[@justducky8508]

Yes please make a separate video discussing under valued stocks

[@valerio727]

Great video, thanks!

[@InvestorCenter]

Glad you enjoyed it! Thanks for watching!

[@trentonbillie7]

Thanks for the vids… learning a lot!!

[@InvestorCenter]

Thank you! Glad they are helpful :)

[@joelavoie9768]

Fantastic video, thank you for sharing! :)

[@Internetjim1235]

Really good presentation- keep them coming

[@InvestorCenter]

Thank you!

[@TheKerth]

The reason why some companies report its financial statements not on the year end it is because they report their FS when the company is on slack season which means movement of assets are very slow, in which the management believe it would capture or would be more representative of the company financial position

[@InvestorCenter]

Very helpful! Thank you!

[@marvinschnee5574]

Great job very informative

[@jeremynarvaez9357]

A video on DCF would be great

[@olivierlemoine9415]

Great stuff -- Would you by any chance have an available copy of that spreadsheet model you use to perform your long term sensitivity analysis?

[@GregKealey]

This is quickly becoming my favourite channel :)

[@InvestorCenter]

Hey Gregory! That is great to hear. Appreciate the support!

[@alejandrovarona1309]

Congratulations, you do an excelent work. Please do the discounted cash flow video valuation. I am eager to see it!

[@InvestorPro7]

This video is a complete guide and I really liked it. There is always something to learn in your videos.

[@InvestorCenter]

Glad you enjoyed the video!

[@awababd-arrahman3104]

Thanks, lot for your deep work. Can you tell me "For how long should I analyze these statements"? last 4 quarters or last 10 years

[@ghosm9855]

Very informing and great content. However, I was wondering do you not consider the consolidated statement of comprehensive income??

[@alexandermaseka6463]

thank you: this is gold right here

[@InvestorCenter]

Thanks for the kind words Alexander!

[@danny100d]

Thank you, again!

[@thefrugallifehacker1225]

I would be very interested in viewing how you complete the DCF model for stock analysis. Where do you pull your data from.

[@Rarealt]

Bloomberg for foundational framework & then pull data from other providers as well.

[@mpsanish]

You’ll need to also make some solid assumptions and forecast. Be sure to look at how the market factors and bake them into ur assumptions.

[@mda0214]

Lol don't listen to the comments posted. This is like a crash course. There's a lot more information you can get from a companies financials. I would recommend taking an online class in accounting at a college. Its a couple thousand max. But you'll make it back fast.

[@davidschroeder3580]

very informative and like the way you broke it down

[@InvestorCenter]

Thank you, David! Glad you found the video informative

[@shubhamtailang2184]

That was a wonderful explanation in laymen language. If you can explain DCF in detail and simple language that will be great. Thanks

[@peterq9359]

Very helpful!

[@InvestorCenter]

Thanks for the kind words, Peter!

[@dakotafleming5261]

Thanks for the great content! Can you do a video about arriving at EBITDA and utilizing industry multiples?

[@javieralessandro8850]

Great video!!! Thanks for share!!!

[@parthkishore9714]

Great Video, also do a Discounted Cash flow Model will be really helpful.... 👍

[@lukeallen282]

Thank you for your video! Please also prepare a video on discounted cash flow analysis to determine if the stock is undervalued.

[@InvestorCenter]

Hey Luke, thanks for the kind words! I will be coming out with that video!

[@lukeallen282]

@@InvestorCenter looking forward to it!

[@1013eden]

Great video we need more contentl ike this and please do a video on projection

[@rafaelageyev9961]

I think everyone would love to see you do a DCF model!!!

[@InvestorCenter]

Thank you!!! Maybe I will put the video out soon :)

[@flmjohn]

Great Video and presentation to understand the concept, could you please make a video to calculate share price basis income projections. Thanks

[@DreaminBig]

Incredible!

[@OnionKnight541]

one day maybe Rob Mauer will do a video like this. i think that was his full time job.

[@julienthefirst9151]

You have a beautiful voice! And good content too :)

[@TheRustyLM]

Thank you Thank you Thank you 🙏

[@InvestorCenter]

You’re welcome You’re welcome You’re welcome 😊

[@SebastianRodriguez-ep9cm]

muy bueno , muchas gracias

[@jonandrews3528]

Very informative

[@InvestorCenter]

Thank you, Jon!

[@elpapasongote]

This is great! Thanks!!!

[@InvestorCenter]

Glad you enjoyed it!

[@regansun1629]

Yes DCF would be very interesting

[@prashanthkoundinya8385]

Awesome video. Please do the dcf valuation.

[@InvestorCenter]

I’m working on that video!

[@prashanthkoundinya8385]

@@InvestorCenter awesome!

[@marshallhosel1247]

Thank you

[@Saad_TheGod]

Great Vid!

[@andredantu6664]

Hi, @investorcentre just watched this video and wanted to say thank you. It was an excellent overview of an income statement. I have not seen your videos before, but I have subscribed now. Thank you.

[@InvestorCenter]

Welcome to the channel :)

[@kevinpascall299]

So clear and very easy to digest. Thank you sooooo very much. - from a non-Accounting, budding investor.

[@InvestorCenter]

Glad it was helpful! I enjoy being able to help :)

[@hoopie1022]

Thank You

[@neilbrodsky2035]

Is there a way to download the spreadsheets you used to analyze the stocks without joining your monthly patreon? Can I do a one time purchase?

[@minipwn0422]

I work in corporate accounting for a publicly traded firm and we have our fiscal year end in October because we would struggle to get everything done with the holiday calendar in December and January

[@TT-mg3yu]

Not everyone can teach like this. Hats off mam.

[@jaysant6958]

In case anyone is wondering, “The difference between them [gross profit margin and operating profit margin] is that gross profit margin only figures in the direct costs involved in production, while operating profit margin includes operating expenses like overhead.” From Investopedia.